In mid-July, CoStar released new data indicating that green buildings are out-performing traditional buildings throughout the California market. The benefits of “going green” — for the purposes of this study, defined as LEED or ENERGY STAR certified — are even greater for building owners in the Los Angeles region than in the state overall.

The report indicated that while traditional (non-LEED or non-ENERGY STAR certified) Los Angeles buildings command an average of $2.16/ft2, tenants were willing to pay $2.69/ft2 for ENERGY STAR certified buildings and $2.91/ft2 for LEED certified spaces. The increased cost of rent appeared to have little effect on vacancy rates, which remained relatively constant with the general market over the 5-year evaluation period.

Additionally, Los Angeles ENERGY STAR and LEED certified buildings showed a distinct advantage in terms of sell-price and asking price. In the past year, the asking price for non-green buildings in the Los Angeles area was $220/ft2 relative to an average market sales price $244/ft2. For ENERGY STAR certified buildings, the asking price was $239/ft2 with a selling price of $337/ft2; LEED certified buildings in LA averaged only $140/ft2 in asking price, but sold for $329/ft2.

The report also provided building class-specific data comparing rent, sales and asking prices, and vacancy rates for ENERGY STAR and LEED certified markets. In Los Angeles, Class A buildings — defined by BOMA as “prestigious buildings competing for premier office users — commanded an average rent of $3.03/ft2 for ENERGY STAR certified sites and $3.31/ft2 for LEED certified sites. Los Angeles Class B buildings, which compete for a wider range of tenants and offer lower prices, tended to command an average of $2.18/ft2 for ENERGY STAR certified and $2.24/ft2 for LEED certified sites — a rate closer to, but still slightly above, the standard for traditional buildings. For both Class A and Class B buildings in the Los Angeles area, vacancy rates for ENERGY STAR certified buildings were, on average, lower than standard rates in the surrounding area. While sales and asking prices were substantially higher for ENERGY STAR certified Class A Buildings in the Los Angeles area, said prices for Class B buildings in Los Angeles were generally lower than those analyzed as the market standard.

The data, which surveyed 296 ENERGY STAR certified existing buildings and 255 LEED certified existing buildings alongside 1,975 traditional (non-green) buildings in Los Angeles, confirms that energy and water savings upgrades (which satisfy a large number of the qualifications for receiving a green certification) are a profitable and worthwhile investment for Los Angeles building owners and property managers. For more information on the rising market for energy efficiency upgrades, green certification programs, and opportunities to increase water and energy savings, visit la-bbc.zgdev5.com or contact Managing Director Ben Stapleton at [email protected].